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How to help your vendors improve

Friday, July 13, 2012 - 06:26
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In his book, The Toyota Way, Jeffrey Liker says that one of the 14 principles that has helped Toyota succeed is this: Respect your network of vendors and suppliers by challenging them and helping them to improve.

Mike Anderson

In other words, you can expect a lot from your vendors, but rather than just challenging them to improve, you need to respect them by helping them to do so. In the process, you all end up winning.

Given that parts account for 36 percent to 40 percent of most shops' sales, I encourage shops to have an annual meeting with the parts managers of the key vendors they work with. Regular, proactive communication with parts managers is the best way to ensure you are respecting them by challenging them and helping them to improve.

I started that annual process out with a questionnaire, asking them in advance to provide current information on our discount structure, key points of contact, etc.

Then I'd sit down and ask, "What do I need to do to get the right parts from you the first time?" I'd point out that when we get the right parts the first time, we get that repair processed more quickly and are on to the next one, which means more parts sales for them, too.

They might tell me, for example, that they need the VIN, the production date and better line notes or descriptions of the clips or hardware we are ordering. In my shops, my estimators all had dual monitors that allowed them to have not only the parts information from the estimating system, but also access to the OEM parts diagrams (all of which are available now through various websites). That helped to ensure they had accurate parts information and also helped them spot parts that weren't shown in the estimating system diagrams, but could be quickly copied and pasted from the OEM info into the estimating system.

Then, I would review with the parts managers what our standard operating procedures were for making sure we got the right parts the first time. I might tell them, for example, that we submit orders this way and expect within X hours to hear back from them with parts price changes and estimated time of arrival. We'd tell them we didn't want them to ship the order until it was complete with all critical parts, so that once we put that vehicle into production, there were no parts-related delays. (We consider as "critical" anything that needed to be installed in order for the vehicle to be returned to the customer.)

While these conversations can be done one-on-one, I had a parts managers' meeting once a year, bringing them all together. It gives them a chance to network, but it also allowed me to go around the table and ask each of them what their parts return ratio had been during the past year. If all of them were in the 3 percent or 4 percent range, but one dealer said it was 17 percent, that gave me a chance to ask: "What are all these other vendors doing that helps us keep our parts return ratio so much lower?" Maybe our return ratio with you is high, not because of something we are doing, but because of something you are or are not doing.

We'd also discuss with them how we wanted to be involved in decisions when there were parts they didn't have in stock. They might be hesitant to get them from another local dealer because that would reduce their margin. Or they might not want the expense of getting a part shipped to them overnight. Involve us in those decisions, I'd tell them.

There may be times when we can let whoever is paying for the repairs know we can get a part in overnight if they are willing to pay an additional fee. There may be times when we accept a lower margin in order to get a part we need more quickly. I'm not saying these are things you have to do; I'm saying you should ask your vendors to share that information with you, have that dialogue and involve you in the decisions.

The bottom line is that you are helping both sides of the parts transaction and respecting your vendors when you challenge and help them to improve.

Mike Anderson, a former shop owner, currently operates COLLISIONADVICE.COM, a training and consulting firm. He also acts as a facilitator for DuPont Performance Services' Business Council 20-groups.

If you have an business issue or question you'd like Mike to address, email him. mike@CollisionAdvice.com

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